Ethiopian legislators have ratified an agreement that will see neighbouring Djibouti drawing underground water from the country's territory free of charge.

The agreement follows a request in January last year by the Ethiopian government for parliamentary approval for the Shinile Zone of Bekuli Rift Valley area – about 100 km from the border with Djibouti.

Ethiopia's Finance and Economic Development minister Sufian Ahmed, and Djibouti's Economy and Finance minister Ilyas Moussa Dawaleh signed the agreement on January 20, 2013.

The pact saw the two countries reaching a consensus to develop Ethiopia's Somali region's underground water to assuage Djibouti's growing water needs.

Prior to the Ethiopian parliament's unanimous approval of the plan during its regular session on Thursday, revelations that Ethiopia had agreed to supply Djibouti with water, free of charge had triggered debates as to what the country stands to gain from the deal.

The accord gives "full and exclusive rights" to Djibouti to draw 103, 000 metric cubes of underground water every day, a total of 37 million metric cubes annually, for the next 30 years.

The government of Djibouti will spend $399 million towards the drilling of holes and other related expenses.

According to the accord, Djibouti would pay compensation to residents of Shinile, Ali Sabih, Dilhil, Ara as well as towns in Djibouti that may be affected by the project.

It would also pay Ethiopians who may suffer a permanent loss or revenue, as per the laws of the two countries.

Before its approval, Ethiopian authorities argued that the bill is in line with the country's' constitution which encourages the promotion of economic ties with its neighbors.

They say the new law is in-line with government's long-term plan to create strong economic, political and social ties with Djibouti.